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Estimating Returns to Education in Off-Farm Activities in Rural Ethiopia

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  • Filip Verwimp

Abstract

I use an extended version of Mincer's original model to estimate the returns to schooling in rural Ethiopia. In a first step, a multinomial logit model is applied to distinguish between four groups of people, (1) full-time farmers, (2) part-time farmers, part time wage workers, (3) part-time farmers, part time traders and (4) full-time non-farmers. In a second step, a correction for sample selectivity is made using the Lee-Heckman method and the returns are estimated. The results show that returns on schooling are high in group (4) and lower in groups (2) and (3). Entry in well-paid jobs is constrained for non educated people. Women are particularly well represented in the third group but strongly underrepresented in the fourth group. The estimation shows that education is a worthwile investment in rural Ethiopia and the fact that households underinvest in education can be attributed to the lack of resources at the household level.

Suggested Citation

  • Filip Verwimp, 1999. "Estimating Returns to Education in Off-Farm Activities in Rural Ethiopia," Working Papers Department of Economics ces9903, KU Leuven, Faculty of Economics and Business, Department of Economics.
  • Handle: RePEc:ete:ceswps:ces9903
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    Cited by:

    1. World Bank, 2005. "Education in Ethiopia : Strengthening the Foundation for Sustainable Progress," World Bank Publications, The World Bank, number 7434.

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